ANKARA (Reuters) - Turkey's ruling party
begins deliberations on the shape of the next government on Monday after
Prime Minister Tayyip Erdogan secured his place in history by winning
the nation's first direct presidential election.

Erdogan's victory in Sunday's vote takes him a step closer to the
executive presidency he has long coveted for Turkey. But it is an
outcome which his opponents fear will herald an increasingly
authoritarian rule.

In the coming weeks, Erdogan will for the last time chair meetings
of the ruling AK Party he founded and oversee the selection of a new
party leader, likely to be a staunch loyalist and his future prime
minister.

He will be inaugurated on Aug. 28.

"Today is a new day, a milestone for Turkey, the birthday of Turkey,
of its rebirth from the ashes," Erdogan, 60, told thousands of
supporters in a victory speech from the balcony of the AK Party
headquarters in Ankara late on Sunday.

Supporters honking car horns and waving flags took to the streets in
Ankara after results on Turkish television said Erdogan, the prime
minister for more than a decade, had won 52 percent of the vote.

The celebratory mood filled the front pages of pro-government
newspapers.

"The People's Revolution", said a banner headline in the Aksam daily
above a picture of Erdogan waving to the crowds overnight. Other
headlines spelled out: "Erdogan's historic triumph", "The People's
President".

Investors initially welcomed the result on hopes that it would
ensure political stability, after nearly 12 years of AK Party rule.
The lira <TRYTOM=D3> rallied to 2.1385 against the dollar from
2.1601 late on Friday.

However, some said the market reaction could be short-lived.

"We expect the market will refocus on the composition of the
cabinet," said Phoenix Kalen, a London-based strategist at Societe
Generale, warning there could be "investor concern over the future
trajectory of economic policy-making".

It was a narrower margin of victory than polls had suggested but
still 13 points more than Erdogan's closest rival, and comfortable
enough to avoid the need for a second round runoff.

The chairman of the High Election Board confirmed Erdogan had a
majority, with more than 99 percent of votes counted, and said full
provisional figures would be released later on Monday.

Erdogan has vowed to exercise the full powers granted to the
presidency under current laws, unlike predecessors who played a
mainly ceremonial role. But he has made no secret of his plans to
change the constitution and forge an executive presidency.

"I want to underline that I will be the president of all 77 million
people, not only those who voted for me. I will be a president who
works for the flag, for the country, for the people," he said in his
victory speech.

The electoral map suggested that might not be easy.

While the expanses of the conservative Anatolian heartlands voted
overwhelmingly for Erdogan, the more liberal western Aegean and
Mediterranean coastal fringe was dominated by main opposition
candidate Ekmeleddin Ihsanoglu, and the southeastern corner by
Kurdish candidate Selahattin Demirtas.

'CORONATION'

Turkey has emerged as a regional economic force under Erdogan, who
has ridden a wave of religiously conservative support to transform
the secular republic founded by Mustafa Kemal Ataturk on the ruins
of the Ottoman empire in 1923.

But his critics warn that a President Erdogan, with his roots in
political Islam and intolerance of dissent, would lead the NATO
member and European Union candidate further away from Ataturk's
secular ideals.

"This was more of a coronation than an election, with the result
preordained quite some time ago," said Nicholas Spiro, managing
director of London-based Spiro Sovereign Strategy.

But in the long
term, there are concerns about concentration of power in the hands
of a sometimes impulsive leader.

"Mr Erdogan continues to dominate Turkey's political scene and is
eager to turn the presidency into an executive, hands-on role. He
called the shots as premier and he will keep calling the shots as
president," Spiro said.

"Turkey's next premier will govern in Mr Erdogan's shadow."

Ihsanoglu, a former diplomat and academic who won 38.5 percent of
the vote according to broadcasters CNN Turk and NTV, congratulated
Erdogan on the result in a brief statement.

Demirtas took 9.7 percent, according to the TV stations - a result
for an ethnic Kurd that would have been unthinkable just a few years
ago as Turkey battled a Kurdish rebellion and sought to quell
demands from the ethnic minority.

POLITICAL INTRIGUE

It will be vital for Erdogan to have a loyal prime minister. Under
the constitution, he will have to break with the AK Party before he
is inaugurated in a little over two weeks' time.

Should his influence over the party wane, Erdogan could struggle to
force through the constitutional changes he wants to create an
executive presidency, a reform which requires either a two-thirds
majority in parliament or a popular vote.

"In a few days when the official results are announced, the prime
ministerís relationship with the party and the parliament will be
over," Deputy Prime Minister Bulent Arinc told reporters in Ankara
late on Sunday.

"You will of course ask who will be prime minister and the leader of
the party. Starting from tonight, I know that there will be work
done on this front," he said.

Senior AK officials say foreign minister Ahmet Davutoglu, who has
strong support within the party bureaucracy and has been Erdogan's
right-hand man internationally, is the top choice to succeed him,
although former transport minister Binali Yildirim is also trying to
position himself for the job.

Erdogan's critics fear a supine prime minister will leave him too
powerful, and erode the presidency's traditional role as a check on
the powers of the executive. His backers dismiss such concerns,
arguing Turkey needs strong leadership.